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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Flex Ltd was 1.16. The lowest was -6.74. And the median was -2.51.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Flex Ltd for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.8657||+||0.528 * 0.9903||+||0.404 * 1.0274||+||0.892 * 0.9665||+||0.115 * 0.9145|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1776||+||4.679 * -0.0702||-||0.327 * 0.9968|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,163 Mil.|
Revenue was 6114.999 + 6008.525 + 5876.813 + 5772.698 = $23,773 Mil.
Gross Profit was 416.455 + 313.691 + 405.995 + 406.337 = $1,542 Mil.
Total Current Assets was $8,614 Mil.
Total Assets was $12,803 Mil.
Property, Plant and Equipment(Net PPE) was $2,322 Mil.
Depreciation, Depletion and Amortization(DDA) was $600 Mil.
Selling, General & Admin. Expense(SGA) was $1,003 Mil.
Total Current Liabilities was $6,878 Mil.
Long-Term Debt was $2,798 Mil.
Net Income was 129.469 + -2.508 + 105.729 + 61.344 = $294 Mil.
Non Operating Income was -3.09 + -8.388 + -3.529 + -1.481 = $-16 Mil.
Cash Flow from Operations was 469.636 + 279.62 + 263.932 + 196.673 = $1,210 Mil.
|Accounts Receivable was $2,585 Mil.
Revenue was 6763.177 + 6316.762 + 5566.248 + 5951.6 = $24,598 Mil.
Gross Profit was 452.467 + 396.916 + 352.341 + 378.817 = $1,581 Mil.
Total Current Assets was $8,957 Mil.
Total Assets was $13,050 Mil.
Property, Plant and Equipment(Net PPE) was $2,240 Mil.
Depreciation, Depletion and Amortization(DDA) was $518 Mil.
Selling, General & Admin. Expense(SGA) was $881 Mil.
Total Current Liabilities was $7,152 Mil.
Long-Term Debt was $2,741 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2162.75 / 23773.035)||/||(2584.909 / 24597.787)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(1580.541 / 24597.787)||/||(1542.478 / 23773.035)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (8613.622 + 2321.536) / 12803.049)||/||(1 - (8956.604 + 2239.921) / 13049.518)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(518.179 / (518.179 + 2239.921))||/||(600.231 / (600.231 + 2321.536))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(1003.132 / 23773.035)||/||(881.411 / 24597.787)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((2797.984 + 6877.757) / 12803.049)||/||((2741.474 + 7152.271) / 13049.518)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(294.034 - -16.488||-||1209.861)||/||12803.049|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Flex Ltd has a M-score of -3.00 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Flex Ltd Annual Data
Flex Ltd Quarterly Data